The world of retail is evolving. A combination of sustained growth in e-commerce, changes in consumer behavior, and rapid technological advancement have disrupted and reshaped an industry that once was dominated by the high street.
E-commerce and real estate demand
The number of physical stores faces ongoing decline as consumers increasingly prefer to shop from the comfort and convenience of their own homes. However, this does not mean that all commercial properties are at risk. As e-commerce grows, the need for an adequate supply chain to meet demand becomes more prevalent. While PERE deals focused on retail have fallen, the number and value of logistics deals have generally increased for the past 10 years. This has been emphasized over the past four years, culminating in a record 207 deals for an aggregate $32bn in 2019, more than double the total in 2018.
E-commerce sites look for logistically feasible sites and warehouses in metropolitan areas to make deliveries more efficient. Short turnover times have forced these companies to be based in bigger cities to feed the demand. Thus, even if they are not based on the main shopping street, they still have a local presence.
Will we see a change in building design?
We will be seeing a shift to larger warehouses as e-commerce keeps growing. According to CBRE, “the average new warehouse in the U.S. increased by 108,665 sq. ft. (143%) in size and 3.7 feet in height when comparing high development activity periods in 2012-2017 and 2002-2007.” More technologically advanced spaces with modern logistics facilities will be in high demand.
- How has e-commerce shaped industrial real estate demand? by CBRE
- The Impact of E-commerce on Real Estate